Preparing for RAC expansion

January 18th, 2012 - Betsy Nicoletti
Categories:   Compliance  

The Recovery Audit Contractor Initiative was a CMS demonstration project whose purpose was to identify overpayments from the Medicare Trust Fund and return those overpayments to Medicare.  CMS hired private contractors in three states to do this.  CMS found the program to be wildly successful, returning far more money than the program cost.  Congress expanded the program to all 50 states.

During a recent conference call on the RAC program, CMS said that the contractors would start with recoving money on claims that did not require reviewing medical records.  Practices can expect to receive a demand letter, rather than a request for the record for review.  These demand letters will be based on errors/incorrect payments that can be found using software review, such as duplicate payments.   The RAC contractor is going to look at paid claims data, and determine what claims might have been incorrectly paid by your carrier.  Besides duplicates, other issues that might be discovered automatically would be bundling errors, use of modifiers, or services paid to a hospital within the 72 hour period prior to admission.  If a practice use of modifier 25, 57 or 59 varied from the norm, that type of issue might be identified in the automated review.  Of course, the RAC contractors aren't required to tell us what they are looking for specifically, and it will certainly vary from contractor to contractor.

The initial three contractors each used their own proprietary software to select services to audit.  They mined paid claims data, sent requests for notes, and then reviewed the medical records.  Much of the money that was returned came from hospital and DME providers, but some physicians paid back money, as well.

The contractors are paid a percentage of what they return to CMS.  The larger the claim, the greater their payment will be for recovering the money.  They select claims to audit from analyzing the paid claims data.  Based on this, what should physician practices do to prepare?

  • There's no substitute for a compliance program.  Do what you said you would in your plan.  Get coding education for staff and providers every year.  (And, eat right, go to bed early and exercise...)
  • Compare your data to national norms for your specialty.  Within the practice, compare individual data for each provider.  Look for variance.
  • Look at modifier usage, particularly modifiers that bypass claims editing, such as 24, 25, 57, 59.  Are you using these correctly?   Variance in modifier usage will be easy to find through data mining.
  • Look at the ratio of new patients to consults, compared to your specialty.
  • Look at E/M variance.
  • If you provide lab services, look at panels and component codes

The RAC may want to review individual services that cost a lot: That $12,000 surgery you performed, for example, or it may want to review services with a small dollar value but done in high volume.  Those 99212's you billed with every venipuncture. 

You can find comparative data at the CMS web site, you can buy it from a commercial vendor, or call your specialty society.

RAC does have in its scope E/M services.  Here is what the FAQ from the CMS website says about that:

From their website: 
Will the Recovery Audit Contractors (RAC) review evaluation and management (E&M) services on physician claims under Part B?

Yes, the review of all evaluation and management (E & M) services will be allowed under the RAC program. The review of duplicate claims or E & M services that should be included in a global surgery were available for review during the RAC demonstration and will continue to be available for review. The review of the level of the visit of some E & M services was not included in the RAC demonstration. CMS will work closely with the American Medical Association and the physician community prior to any reviews being completed regarding the level of the visit and will provide notice to the physician community before the RACs are allowed to begin reviews of evaluation and management (E & M) services and the level of the visit.


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